Why Referral Programs Matter

If you work in the Fitness Industry, you certainly understand that your clients are the lifeline of your business. Without them, you wouldn’t be open for business. That being said, one of the biggest challenges most business owners — not just in the fitness industry — face is getting new members through the doors.

You might have the best facilities and new equipment, offer a variety of classes, and provide exceptional customer service. Yet, it’s not enough to simply open your doors and wait for members to roll through even with all those amazing things.

Today, there are almost 40,000 different types of fitness facilities across the United States, wanting to grow and attract new members. And not only do you want to attract new members, but you also want to attract the right kind of customers so they hopefully stick around for a while as long-term members.

For fitness facilities, implementing a referral program could be the perfect solution. Why? Well, it’s no secret that people tend to trust referrals and opinions from friends and family - think about that last time you asked someone you know, like, and trust for their opinion on something? That person's "on the ground" input probably still matters more to you than any online review. In fact, statistics show that people are four times more likely to make a purchase when they get referred to a product or service by a friend.

So, to help, we put together this guide that will break down everything that you need to know about referral programs we seen or have run in the past ourselves. We’ll cover how they work, some benefits, how to plan and execute one, and more.

What Is a Referral Program?

Basically, a referral program is a way to reward your existing members for helping bring in new customers. You can leverage their personal network to attract customers that you might not have had the opportunity to connect with otherwise. As we continue chatting about this, it's important to remember that the overall cost of rewarding your existing members is also going to be far lower compared to the lifetime value a new member will bring.

Keeping referral programs cost-effective from Day 1 will make them more feasible long-term and contribute to generating more revenue as time goes by. When building a referral program, think about how often you might rave about a new product or service you recently used to your family and friends. When can you encourage and entice existing members to do the same thing about your fitness business? It becomes a win-win for everyone involved.

How Does a Referral Program Work?

The general concept of a referral program is pretty simple. In a nutshell, it's a specific marketing tool that leverages the power of word of mouth. The basic idea is to incentivize your current members to refer their friends, family, or anyone else they may know. In the end, this leads to your fitness business gaining new members and they also receive something in return.

It’s important to recognize that when implementing a referral program, the incentive needs to appeal to and benefit everyone involved. Existing members need to get something in return and so do new members.

For example, if a member refers a friend, they might receive a free gift bag of gym merchandise or a discount on the price of the next month of their membership. In return, the new member might also receive a discount on their first month or receive one free personal training session. We like to refer to this as a two-way street for referrals.

What Are the Benefits of a Referral Program?

You might have other marketing strategies in place that are doing a pretty good job at raising brand awareness. So why should you change things up and implement a referral program? Because when someone is referred by a friend to either try or purchase something, they’re more likely to use that product or service for longer.

Referrals also help to establish a level of brand authority, which makes these programs one of the most powerful marketing tactics at your disposal. Statistics show that the lifetime value of newly referred customers becomes almost 16% higher compared to non-referred customers.

Here are some of the biggest benefits of a gym referral program:

• Increase the number of members in your business
• Build a dedicated and loyal community of customers
• Reduce customer loss and increase customer retention
• Generate additional revenue
• Members get rewarded, leading to long-term loyalty

How Do You Plan a Referral Program?

Now that we've covered what a referral program is and how it works, let’s dive into how to plan and execute one.

The first step is to choose which type of incentive you’re going to use by answering these questions: How are you going to reward both existing members and the new ones they refer to? What are you going to offer them in return for their referrals?

Need a little inspiration? Here are a few ideas to help you get started:

• Free fitness classes and/or additional guest passes
• Free or discounted membership for a month
• Free merchandise, gym gear, t-shirt, etc.
• Gift cards for classes or services

An important thing to consider with your incentives is that the total size of the reward doesn’t necessarily matter and it needs to be realistic for your business financials when you start out.

You can also take it a step further and add layers of incentives. For example, if some existing members are regularly bringing in new referrals, they could receive higher incentives for every five or ten new members that sign up with a tiered rewards program.

But, that being said, simple is best. Why? Well, if someone can't understand or quickly explain the program they are participating in, they are most likely not going to. So, no need to overcomplicate the process - keep it fun and simple.

The next thing you’re going to do is determine how you’re going to promote your referral program. There’s no sense in putting a strategy together if you’re not getting the word out in the most effective way.

Think about how you usually engage with and interact with your members. Is it through things like posters and flyers? Is it across your social media channels or through regular emails and SMS?

Here are a few effective ways to implement your referral program:

• Word of mouth. Connect with your members and engage with them. Explain what’s happening and the benefits of them taking part. This will encourage them to interact with their friends and family to help drive referrals.
• SMS messaging and emails campaigns. Leverage the power of marketing automation to set up communication channels. Create a strategy that targets existing members through SMS messaging and emails explaining what the referral program is. Continue to highlight the benefits as the program proceeds.
• Advertising and signage. Strategically place posters and other signage in your gym and around the community in high-traffic areas. This helps keep the program top of mind and ensures that members are aware of what’s happening.
• Social media. Use the reach that your social media platforms have to spread the word. Members can like, comment, and share posts about the program to help raise awareness and increase the number of referrals.

Whatever avenues you choose to use, they will all help you leverage the reach that you already have to encourage members to get on board.

How to Execute a Referral Program and Make It Successful?

Once you have the strategy of your referral program in place, it’s time to execute it. One of the most important things to consider is how you’re going to keep track of it, monitor it, and measure new referrals.

In the land of fitness, this can be a big deciding factor for you when choosing booking platforms as some may have built in features. To help level the playing field a bit, we'll continue forward as if your booking platform has no abilities to help with referral programs and you can adjust our suggestions based on your platform.

Ok, so basically, you want to make sure that if a member is delivering on what you asked for, you’re also delivering on the incentives you offered. And, the good news is that if you have a simpler program, it's also going to be simpler to track. You can leverage the power of online tools, like LoopSpark's Sales & Marketing CRM, or use the spreadsheet method. Whatever you choose, just ensure you’re keeping things accurate and up to date.

Once you execute your strategy you’re also going to want to track and monitor analytics. This is going to provide valuable insights into whether or not the program is working and if you need to make any adjustments.

Analytics can offer details into how many people have been referred, who these people are, where they’re located, and any other details that you might find important. If things aren’t working the way you had expected, you might need to tweak a few things so this program is also beneficial for your business.

An all to common situation we see is referral programs being built off of another business and those incentives being too expensive for where your business is right now. We all regularly see big companies with monthly ambassador allowances, big discounts, hefty gift bags, two for one deals, etc. and those are really great to study but, if your monthly marketing budget is not there yet - that's ok. Take a step back. Start with what you have available to you now and as you grow your client base, that marketing budget will increase too.

What's the take-home message?

Growing your fitness business is going to be met with a fair amount of competition but it absolutely can be done. After reading through this article, we are confident that you have a lot of great tools to help you start spreading the word and incentivize your members.

As you plan your referral strategy, think through these questions: What does your facility do to stand out from the rest of the competition? What are the services you offer that make members want to join? What things keep members with you long term? Essentially, why should the new member sign up and stay?

Knowing all of these details inside and out makes a big difference when you start to market the program and communicating these details effectively to your target market will lead to a higher chance of program success.

And since we love sharing data, you should also add this to the list of why referral programs matter - almost 84% of people trust the recommendations they get from a friend or family member. So, as we like to say with our clients, "don't leave those opportunities on the table." Build that referral program, market it, look at the analytics, and adjust as you need to - you got this!